Business Corpus: Semiconductor Equipment Stocks Fall On Morgan Stanley DowngradeApplied Materials and other semiconductor equipment stocks tumbled Thursday after investment bank Morgan Stanley soured on the sector. The post Semiconductor Equipment Stocks Fall On Morgan Stanley Downgrade appeared first on Investor's Business Daily.

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Applied Materials (AMAT) and other semiconductor equipment stocks tumbled Thursday after investment bank Morgan Stanley soured on the sector.

Morgan Stanley analyst Joseph Moore lowered his rating on the semiconductor equipment industry group to in-line from attractive. He also downgraded Applied Materials stock to equal-weight from overweight and trimmed his price target to 54 from 58.

"After having an Attractive view on the industry for over two years, we move to the sidelines," Moore said in a report. "We aren't negative, but we see the stocks as rangebound."

He also cited weakness in the memory chip and foundry businesses for his call.

Semiconductor Equipment Stocks 'Rangebound'

"We see equipment stocks as more rangebound for the next 6-12 months, with limited downside but also limited upside, reflecting our more cautious view of memory and memory capital spending," he said.

Moore does not see a rapid rebound in memory chip equipment spending that some companies have forecast.

Chip-gear stocks already have been impacted by second-quarter results and third-quarter guidance.

Among semiconductor equipment stocks, Moore favors Lam Research (LRCX). He rates the stock as overweight.

Applied Materials stock fell 1.9%, near 49.25, in midday trading on the stock market today. Lam Research dropped 2.5%, near 185.20.

IBD's Semiconductor Equipment industry group dipped 1.1% on Thursday. It includes 37 stocks.

Cautious On Chip Stocks

Morgan Stanley also shifted to a "cautious" industry view from "in-line" for the semiconductor segment.

"Business is healthy, although upside to estimates is now difficult to come by," Moore said in separate report. "Furthermore, elevated inventory and stretched lead times leave no margin for error as any lead time adjustment or demand slowdown could drive a meaningful correction."

Risk/reward for investors in the sector is "the poorest it has been in three years," he said.

The brokerage downgraded ON Semiconductor (ON) to underweight from equal weight and cut its price target to 18.50 from 20. ON Semi stock fell 1.3%, near 22.15.

The firm still rates some chip stocks as overweight: Nvidia (NVDA), Xilinx (XLNX), and Ambarella (AMBA). Those companies should benefit from secular growth in artificial intelligence, data centers and autonomous driving, Moore said.

Semiconductor Stocks To Consider Buying When The Time Is Right

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